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Nigeria Raises ₦45b in 5-, 20-yr Bond Sales

Posted by Finintell on Thursday, 17 September 2015

Nigeria sold 45 billion naira worth of naira-denominated bonds maturing in 2020 and 2034 at an auction on Wednesday, paying higher yields than at its previous auction in August, the Debt Management Office said on Thursday.

The amount raised at the auction was short of the 70 billion naira initially proposed by the debt office. Traders said the debt office was constrained by the higher yields that investors demanded and reduced the amount of debt sold.

Investors had asked for yields ranging from 13.5 to 20 percent for the 2020 bond and 14.5 to 20 percent for the 2034 debt, but the debt office decided to cut off the sale at 15.95 and 15.97 percent respectively.

The debt office sold 20 billion naira worth of 2020 debt at 15.95 percent yields, 57 basis points more than 15.38 percent at the last auction in Aug.

A total of 25 billion naira worth of the 2034 bond was sold at 15.97 percent against 15.19 percent last month.

Traders said the auction showed the government was no longer willing to borrow at higher yields, especially in the near term.

"The central bank and DMO have decided to cap interest rates on borrowing at below 16 percent in the near term, and this should signal an end to volatility in the debt market," one dealer said.

U.S. investment bank JP Morgan said last week it would remove Nigeria from its Government Bond Index (GBI-EM) by the end of October, after warning the government that currency controls were making transactions too complicated.

But traders said the market has already overcome the effects of that move, and most offshore investors had exited the market prior to the JP Morgan announcement.